Strategic Finance receiver, helping Securities Commission, says 'several transactions' warrant further investigation

Strategic Finance's receiver says he has been helping the Securities Commission with its investigation into the failed property development lender and believes several transactions dating from December 2007 to August 2008 require further investigation.

In a letter to Strategic investors receiver and PricewaterhouseCoopers (PwC) partner John Fisk said PwC had provided the Securities Commission with access to Strategic's records and "certain analysis" when requested.

"In respect of our own investigation, we have initially focused on the period December 2007 to August 2008 when payments to investors were suspended," Fisk wrote.

"Given the financial position of Strategic during this period, we have identified several transactions undertaken during the December 2007 to August 2008 period which we consider warrant further investigation," Fisk added.

"One of these transactions is being investigated by Strategic's liquidator (Corporate Finance) and the rest are being investigated by the receivers. We have now referred our findings to date to our legal counsel to determine what actions, and against whom, may be available to us in respect of these matters."

Fisk's latest letter to investors comes after Serious Fraud Office CEO Adam Feeley told interest.co.nz last week that the SFO had "made some enquiries" in relation to Strategic.

"The Securities Commission is doing a lot of work on it and we are in ongoing discussions with them about the next steps. I think it'd be fair to say that in the next few weeks we will have a clearer view on whether that's a matter we take forward or not or whether it's something the Commission takes forward or not. But at the moment it's not an (SFO) investigation and whether it becomes an investigation, at the moment we don't want to get drawn on that," Feeley said.

According to the Securities Commission's website, its investigation into Strategic opened in August 2008 and is ongoing.

Strategic was tipped into receivership by its trustee Perpetual Trust last March. In his letter Fisk reiterates PwC's preliminary estimate the Strategic secured debenture investors will get back gross recoveries, prior to costs, of between 12% and 35%, or between NZ$44.1 million and NZ$128.7 million of the NZ$367.8 of principal investment owed.

So far they've got back just 2 cents in the dollar.

"We are disappointed, at this time, not to be in a position to announce when a further distribution might be possible," Fisk wrote.

"There are still considerable uncertainties relating to the recoverability of the property loans which will have an impact on the final recoveries that we will be able to achieve for secured debenture investors. As you may be aware from media commentary, the property market continues to be challenging and borrowers continue to face difficulties in achieving property sales or to re-finance."

Unsecured Strategic creditors, including unsecured depositors' owed NZ$1.45 million and subordinated noteholders owed NZ$21.7 million, are unlikely to get back any money at all.

Fisk added that PwC was committed to recovering as much as it could from Strategic's property loans, personal guarantees provided by borrowers and legal action that "may be available" to the receivers.

"In the short-term we are focused on recovering sufficient funds to make a further distribution to secured debenture investors within the next six months."

Strategic, whose CEO was Kerry Finnigan and which counted former All Blacks captain and ex-New Zealand Rugby Union chairman Jock Hobbs among its directors, froze repayments to investors' in August 2008 blaming tough conditions in the property market. Investors' then voted for a moratorium in December 2008 that aimed to repay them 100% of their principal investments plus interest through asset realisations over five years. Perpetual Trust subsequently called in the receivers in March ;last year after Strategic failed to generate sufficient loan recoveries for a repayment to investors' that had been due in January last year, and failed to sway the trustee with suggested alternatives to receivership.